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Espirito Santo: complexity, opacity and moral hazard

There is absolutely nothing holy or spiritual about Portugal's Espirito Santo Group. It's a complex, opaque structure much of which is incorporated in a tax haven and part of which is suspected of fraud. It's impossible to regulate and some of the funding relationships are distinctly odd. And it includes a bank. Moral hazard de luxe.

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A version of this post appeared on Pieria in December 2013.
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where asset prices go into a tailspin and banks and businesses fail in droves,
bankrupting households and governments and resulting in massive unemployment,
poverty and social collapse. America experienced this in the Great
Depression and narrowly avoided it in the Great Recession. More recently, at least one European country has felt the effects of this catastrophe.
But there is also another kind. This is where falling costs
and increasing efficiency of production create a glut of consumer goods and
services. In other words, supp…

For over a century now, the world has lacked a genuinely international means of payment. This is partly due to decisions made at the Bretton Woods conference in 1944, when the US dollar was adopted as the principal international settlement currency, rather than John Maynard Keynes's suggestion of an independent global currency that he called "bancor". Although the Bretton Woods gold-backed structure ended in 1971, the US dollar became ever more dominant.

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1. Issues its own currency exclusively
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4. Its central bank sets the interest rate
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6. The Government does not borrow in any currency other than its own.

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